Ningbo's economic stimulus policy protects leading enterprises:

Ningbo recently took the lead in introducing 26 new economic stimulus policies in the country. The policy implementation period was from January 1, 2012 to December 31, 2015. The policies introduced this time covered six aspects, including consumption tax reduction, investment expansion, structural adjustment, and scientific and technological innovation.

On the industrial enterprise side, the policy mainly focuses on supporting the upgrading of industrial transformation and the reduction of tax burdens. The policy mentions that “municipal finance allocates an additional 20 million yuan of industrial chain cultivation capital every year within 3 years from 2012, focusing on supporting the industrial chain technology reform of leading enterprises in the industry, and improving simultaneous R&D and product support capabilities of key key supporting enterprises, etc.”, “Implementing the 'High Growth Enterprise Cultivation Plan' special action, starting in 2012, a special fund for cultivating high-growth enterprises in the city will be set up, and a number of technology-based high-growth enterprises will be dynamically selected every year within five years to increase policy support. For enterprises that grew normally during the nurturing period, the amount of local retention that actually paid taxes increased by 20% or more compared to the previous year will be rewarded in full. Enterprises that successfully cultivate in advance can enjoy this policy for 3 years.”

It can be seen from “Article 26” that the current economic stimulus policy in Ningbo is mainly aimed at stabilizing the capital chain required for micro, small and medium-sized enterprises to operate, and the second is to replace downstream investment through special funds to establish the transformation and upgrading impetus for leading industrial enterprises in the region. As a leading aluminum profile enterprise in Jiangsu and Zhejiang, the company is expected to receive financial support from the government in implementing this policy, thereby mitigating profit losses caused by the overall weakness of the company industry.

The company anticipated losses in the first half of the year and hit a new low within two years:

The company announced its interim results forecast on July 17. The company's net profit for the first half of 2012 is expected to be a loss. Net profit for the same period last year was 1,327 million yuan, with earnings of 0.01 yuan per share. Affected by this news, the company's A-share price hit a two-year low of 6.02 yuan/share on July 17.

The company uses industrial aluminum profiles as its main product. Since this year, the price performance of the aluminum metal market has been poor and has been declining. The growth rate of fixed asset investment in Ningbo in the first quarter declined significantly compared to the same period last year, suppressing downstream demand for aluminum. The increase in fixed asset investment growth in April and May stimulated the growth of aluminum production, but the downward pressure on aluminum prices from the capital side continued to put pressure on aluminum sales, and the company experienced losses.

In addition, the company is currently facing a civil lawsuit of 300,000 yuan. On July 12, the company announced that the company recently received the “Administrative Penalty Decision” issued by the Securities Regulatory Commission. The Securities Regulatory Commission decided to give the company a warning and fine of 300,000 yuan because the company did not promptly disclose the loan contract lawsuit involved, and it was not disclosed in the 2010 annual report or last year's semi-annual report. This puts more pressure on the company's capital.

Investment Strategy:

Stimulated by news of Ningbo's economic stimulus policy, listed companies in Ningbo all experienced sharp increases on the 23rd. This increase in valuation is due to the fact that floating capital is heavily speculating on the sector concept, and is not mainly based on expectations of the company's recent healthy performance development. Due to the company's leading position in the region, it is expected to receive financial support from local governments to offset operating losses, but we still recommend investors to be careful about future market increases in the company's stock price when there are no clear signs of news.